ITO, Ward 1(4), Kolhapur V. Shri ParasBhomraj Oswal, Kolhapur

ITA 563/PUN/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72384 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S B WALIMBE
• Keywords: Retrospective amendment; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NOS.561 TO 565/PN/2013 (ASST. YEARS: 2005-06 TO 2009-10) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, KOLHAPUR APPELLANT VS. SHRI PARAS BHOMRAJ OSWAL PROP. OF POOJA BUILDERS & DEVELOPERS, 2804, B WARD, MANGALWAR PETH, KOLHAPUR. PAN:AABPO1487C RESPONDENT C.O NOS.10 TO 14/PN/2013 (ARISING OUT OF ITA NOS.561 TO 565/PN/2013 (ASST. YEARS: 2005-06 TO 2009-10) SHRI PARAS BHOMRAJ OSWAL PROP. OF POOJA BUILDERS & DEVELOPERS, 2804, B WARD, MANGALWAR PETH, KOLHAPUR. PAN:AABPO1487C CROSS OBJECTOR VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, KOLHAPUR APPELLANT DEPARTMENT BY : SHRI S.B. WALIMBE ASSESSEE BY : SHRI M.K. KULKARNI DATE OF HEARING : 25.11.2013 DATE OF PRONOUNCEMENT : 29.11.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM: ALL THESE APPEALS FILED BY REVENUE AND CROSS OBJEC TIONS ARE FILED BY ASSESSEE PERTAIN TO SAME ASSESSEE AND ARIS ING FROM THE CONSOLIDATED ORDER OF THE CIT(A), KOLHAPUR DATED 13 -12-2012 FOR 2 THE A.YS. 2005-06 TO 2009-10, SO ALL ARE BEING DISP OSED OFF TOGETHER FOR THE SAKE OF CONVENIENCE. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN ITS APPEALS IN A.Y.2005-06. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APP EALS), KOLHAPUR WAS JUSTIFIED IN APPLYING THE RATIO OF THE CASE BRAHMA ASSOCIATES V/S. CIT-II, PUNE WHEN IN FACT TH E ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 80 IB(10)(D) OF THE I. T. ACT, 1961. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APP EALS), KOLHAPUR WAS JUSTIFIED IN ALLOWING DEDUCTION U/S.80 IB(10) OF THE I. T. ACT, 1961 WHEN THE ASSESSEE HAD VIOLAT ED THE CONDITION LAID DOWN IN SECTION 80IB(10) (C ) OF THE SAID ACT IN CONSTRUCTING THE 21 BUNGALOWS EXCEEDING THE LIMI T OF 1500 S.F.T. FOR EACH BUNGALOW AS PROVIDED IN THE SA ID PROVISION IRRESPECTIVE OF THE FACT THAT SUCH VIOLAT ION WAS MARGINAL OR MORE. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APP EALS), KOLHAPUR WAS JUSTIFIED IN NOT APPRECIATING THAT IN ORDER TO CLAIM DEDUCTION U/S.80IB(10) OF THE I. T. ACT, 1961 THE ASSESSEE HAS TO FULFILL ALL THE CONDITIONS LAID DOW N THEREIN AND EVEN NON-FULFILLMENT OF A SINGLE CONDITION SHAL L DEBAR THE ASSESSEE FROM ENTITLING TO DEDUCTION UNDER THE SAID SECTION. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APP EALS), KOLHAPUR WAS JUSTIFIED IN NOT CONSIDERING THE FACT OF FILING OF MISCELLANEOUS PETITION BY THE AO BEFORE THE ITAT FOR NOT CONSIDERING TWO GROUNDS IN THE APPELLATE ORDER PASS ED, WHEN THE INFORMATION RELATING RE-ASSESSMENT MADE BY THE AO POINTING OUT SUCH FACT WAS IN THE POSSESSION OF THE LD. CIT(A) AND WHEN THE SAID ISSUE WAS DOMINANT IN DECI DING THE ALLOWABILITY OF DEDUCTION U/S.80IB(10) OF THE A CT AS CLAIMED BY THE ASSESSEE. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APP EALS), KOLHAPUR WAS JUSTIFIED IN HOLDING THAT SPACE OCCUPI ED BY 'VERANDAH' HAS TO BE EXCLUDED FOR THE PURPOSE OF CALCULATING THE 'BUILT UP AREA' OF THE BUNGALOWS. 3 6. THE ORDER OF THE LD.CIT(A), KOLHAPUR BE VACATED AND THAT OF THE AO BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY ANY OTHER GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. THE ASSESSEE IS A BUILDER AND DEVELOPER HAD UNDE RTAKEN CONSTRUCTION OF HOUSING PROJECT VIZ. BHAKTI POOJA N AGAR AT R.S NO.284B, PLOT NO.63, B-WARD, KOLHAPUR. THIS CASE W AS SELECTED FOR SCRUTINY AND DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED IN THE COMPUTATION ENCLOSED, ASSESS EE HAD CLAIMED DEDUCTION U/S.80IB(10) IN RESPECT OF HIS HOUSING PR OJECT BHAKTI POOJA NAGAR. ASSESSEE HAS ALSO MADE SIMILAR CLAIM IN EARLIER YEARS I.E. 2003-04 AND 2004-05 IN RESPECT OF ABOVE HOUSIN G PROJECT. IN THESE YEARS, IN THE ASSESSMENT ORDER PASSED U/S. 14 3(3), ASSESSEE CLAIM WAS REJECTED ON THE GROUND THAT RESIDENTIAL U NITS EXCEEDED 1500 SQ.FT., BEING MAXIMUM AREA PERMISSIBLE U/S. 80 IB(10). 2.1 THE ISSUE OF CLAIM U/S. 80IB(10) WAS EXAMINED I N ALL THE YEARS UNDER APPEAL. ASSESSEE HAD OBTAINED APPROVAL FOR HIS PLAN FROM KOLHAPUR MUNICIPAL CORPORATION TWICE ON 22.02. 2002 AND 10.10.2002. AFTER INTRODUCTION OF SECTION 80IB(10) B FINANCE (NO.2) ACT, 2003 W.E.F. 01.04.2002, ASSESSEE HAD SU BMITTED REVISED PLAN WHICH WAS APPROVED ON 31.03.2004. ON VERIFICA TION OF REVISED PLAN, ASSESSING OFFICER NOTICED THAT TWO RE SIDENTIAL UNITS VIZ. C-5 AND D-5 AND BUILT UP AREA OF 19 OTHER BUNG ALOWS EXCEEDED MAXIMUM PERMISSIBLE LIMIT OF 1500 SQ.FT. FURTHER, THE TOTAL COMMERCIAL AREA IN THE ABOVE PROJECT HAD ALSO EXCEEDED ALLOWABLE BUILT UP AREA OF 2000 SQ. FT., AND SIMILA RLY, THE BUILT UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMEN TS WAS IN EXCESS OF 5% OF AGGREGATE BUILT UP AREA OF THE HOUS ING PROJECT. IN VIEW OF THE VIOLATION OF SECTION 80IB(10) AS OBSERV ED ABOVE, THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF DEDUCTION IN RESPECT OF THE ABOVE PROJECT. CIT(A) HAVING CONSIDERED THE SUBMISSIONS ON BEHALF OF ASSESSEE AL L KINDS I.E. BUILT UP AREA OF TWO RESIDENTIAL UNITS C-5 AND D-5 ARE PERMISSIBLE, 4 BUILT UP AREA OF 19 BUNGALOWS EXCEEDED PERMISSIBLE LIMIT AS PER PROVISIONS OF SECTION 80IB(10) OF I.T ACT. ACCORDI NGLY, DISALLOWANCE WAS MADE. 2.2 MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHO RITY, WHEREIN CIT(A) HAD GRANTED RELIEF AFTER CALLING REMAND REPO RT. CLAIM OF THE ASSESSEE WAS ALLOWED, SAME HAS BEEN OPPOSED BEFORE US. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPO RTED THE ORDER OF CIT(A), INTER ALIA DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT ORDER OF CIT(A) BE SET ASIDE AND THAT OF THE A SSESSING OFFICER. 2.3 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT SECTION 80IB(10) PRIOR TO AMEN DMENT TO THE FINANCE (NO.2) ACT, 2004 W.E.F. 01.04.2005 STOOD AS UNDER: '(10) THE AMOUNT OF PROFITS IN CASE OF AN UNDERTAKI NG DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B EFORE THE 31ST DAY OF MARCH, 2005 BY A LOCAL AUTHORITY, SHALL BE HUNDRED PERCENT OF THE PROFITS DERIVED IN ANY PREVI OUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING P ROJECT IF,- (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS MINIMUM AREA OF ONE ACRE; AND (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES O F DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND A ND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE.' 2.4 SECTION 80IB(10) IN POST AMENDMENT PERIOD STOOD AS UNDER: ' 17 [(10) 18 THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT S APPROVED BEFORE THE 31ST DAY OF MARCH, 19 [2008] BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN 5 THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR F ROM SUCH HOUSING PROJECT IF,- (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998AND COMPLETES SUCH CONSTRUCTION- (I) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL, 2004, ON OR BEFORE THE 31ST DAY OF MARCH, 2008; (II) IN A CASE WHERE A HOUSING PROJECT HAS BEEN, OR, IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2004 BUT NOT LATER THAN THE 31ST DAY OF MARCH, 2005, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. (III) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2005, WITHIN FIVE YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY.] EXPLANATION-FOR THE PURPOSES OF THIS CLAUSE,- (I) IN A CASE WHERE THE APPROVAL IN RESPECT OF THE HOUSING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PROJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUILDING PLAN OF SUCH HOUSING PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY; (II) THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH HAS A MINIMUM AREA OF ONE ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE(A) OR CLAUSE(B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS IN AREAS DEC LARED TO BE SLUM AREAS UNDER ANY LAW FOR THE TIME BEING I N FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN T HIS BEHALF; 6 (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT- UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETRES FRO M THE MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND A ND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; 21 [...] (D) THE BUILT-UP AREA OF THE SHOPS A ND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED 22 [THREE] PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OF 23 [FIVE THOUSAND SQUARE FEET, WHICHEVER IS HIGHER];] 24 [(E) NOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON NOT BEING AN INDIVIDUAL; AND (F) IN A CASE WHERE A RESIDENTIAL UNIT IN THE HOU SING PROJECT IS ALLOTTED TO A PERSON BEING AN INDIVIDUAL , NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS A LLOTTED TO ANY OF THE FOLLOWING PERSONS, NAMELY: (I) THE INDIVIDUAL OR THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL, (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA, (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA.] 25 [EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UNDERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT).] SUB-SECTION (14) WAS ALSO INTRODUCED BY FINANCE ACT 2005 W.E.F. 01/04/2005. CLAUSE (A) OF THIS SUB-SECTION D EFINED THE 'BUILT-UP AREA TO MEAN [(A) 'BUILT-UP AREA' MEANS THE INNER MEASUREMENTS O F THE RESIDENTIAL UNIT AT THE FLOOR LEVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREASED BY THE THIC KNESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENTIAL UNITS;] 7 2.5 THE PROVISION OF SECTION 80IB(10) PRIOR TO THE AMENDMENT BY FINANCE (NO.2) ACT, 2004 W.E.F. 01.04.2004 PERMITTE D A DEDUCTION OF 100% OF THE PROFIT DERIVED IN ANY PREVIOUS YEAR RELATING TO ANY ASSESSMENT YEAR FROM HOUSING PROJECT SUBJECT TO CON DITIONS IN RESPECT OF SUCH HOUSING PROJECT WHICH WAS APPROVED PRIOR TO 31.03.2005. THESE CONDITIONS REQUIRED THE ASSESSEE TO COMMENCE DEVELOPMENT AND CONSTRUCTION OF PROJECT ON OR BEFOR E 01.10.1998 ON THE PLOT OF LAND WHICH IS MINIMUM AREA OF ONE AC RE AND RESIDENTIAL UNITS AT MAXIMUM BUILT UP AREA OF 1500 SQ.FT. IF NOT SITUATED AT THE DELHI, MUMBAI OR EVEN 25 KILOMETRES FROM MUNICIPAL LIMITS OF THESE AREA IN WHICH CASE MAXIMU M PERMISSIBLE BUILT UP AREA OF RESIDENTIAL UNIT WAS 10,000 SQ.FT. THE PROVISIONS OF SECTION 80IB(10) AS AMENDED BY FINANCE (NO.2) AC T, 2004 W.E.F. 01.04.2005 AS CLAUSE (A) WHICH FURTHER QUALIFIED NE CESSITATING COMPLETION OF CONSTRUCTION ON OR BEFORE 31.03.2008 IF PROJECT WAS APPROVED BY LOCAL AUTHORITY BEFORE 01.04.2005 I.E. WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY IF THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER 01.04.2004 BUT ON OR BE FORE 31.03.2005, AND WITHIN 5 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH HOUSING PROJECT IS APPROVED BY THE LOCAL A UTHORITY IF THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY ON OR A FTER 01.04.2005 (W.E.F. 01.04.2010). THE AMENDED PROVISIONS PROVID ED FOR LIMIT FOR COMPLETION OF PROJECT WHICH WAS NOT THERE IN THE EA RLIER SECTION. 2.6 CLAUSE (D) WAS INTRODUCED TO THE PROVISIONS OF SECTION 80IB(10) BY THE BY THE FINANCE (2) ACT 2004 SPECI FYING THAT BUILT UP AREA OF SHIPS AND OTHER COMMERCIAL ESTABLISHMENT S INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED 5% OF AGGREGA TE BUILT UP AREA OF HOUSING PROJECT OR 2000 SQ.FT. WHICHEVER IS LESS, WHICH IS CHANGED TO 3% OF AGGREGATE AREA OF HOUSING PROJECT OR 5000 SQ.FT. WHICHEVER IS HIGHER W.E.F. 01.04.2010. 8 2.7 CLAUSE (A) OF SUB-SECTION 14 WAS INTRODUCED BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 01.04.2005 TO DEFINE BUILT UP AREA AS THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE F LOOR LEVER, INCLUDING PROJECTION AND BALCONIES AS INCREASED BY THE THICKNESS OF WALLS, BUT NOT INCLUDING COMMON AREA SHARED WITH OTHER RESIDENTIAL UNITS. 2.8 IN THE INSTANT CASE, THE INSERTION OF DEFINITIO N OF BUILT UP AREA IN THE CONTEXT OF COMPLETION OF PROJECTS WHICH HAS BEEN APPROVED AND WHICH HAS COMMENCED PRIOR TO 01.04.2005 IN THE AMENDED PROVISION HAVE TO BE APPRECIATED. AS MENTIONED ABO VE, THE ASSESSEE HAD UNDERTAKEN CONSTRUCTION OF PROJECT VIZ . BHAKTI POOJA NAGAR THE PROFITS IN RESPECT OF WHICH ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB(10) FOR ALL THE YEARS. ACCORDI NG TO ASSESSING OFFICER, THE PROJECT DID NOT FULFIL BASIC REQUIREME NTS AND CONDITIONS OF LIMITATION OF BUILT UP AREA OF 5000 SQ. FT., PER UNIT AS LAID DOWN UNDER THE STATUTE. HE FOUND TWO RESIDENTIAL BUNGAL OWS HAVE AREA OF ABOUT 1500 SQ.FT. AND 19 RESIDENTIAL BUNGALOWS H AVE AREA OF BEYOND STIPULATED 1500 SQ.FT. OF VERANDAH WAS ALSO INCLUDED. ASSESSING OFFICER NOTICED THAT PROJECT CONTAINED RE SIDENTIAL UNITS BUILT FOR OWNERS OF LAND AND TRANSFERRED TO THEM IN CONSIDERATION AS PRICE IN TERMS OF DEVELOPMENT AGREEMENT, RESIDEN TIAL UNITS TO BE SOLD TO THE PUBLIC AND SHOPS FOR SALE. HE NOTED TH AT PROJECT ACCOUNTS WERE NOT MAINTAINED FOR TWO TYPES OF RESID ENTIAL UNITS AND COMMERCIAL SPACE AND THAT VARIOUS EXPENSES WERE OF NATURE THAT THEY COULD NOT BE SEGREGATED. HE, THEREFORE, HELD THAT ENTIRE PROJECT WAS ONE AND THAT ALL BUNGALOWS WERE PART OF THE PROJECT. HE ALSO OBSERVED THAT MUNICIPAL AUTHORITIES HAVE GI VEN APPROVAL FOR CONSTRUCTION OF ALL UNITS INCLUDING BUNGALOWS I N SAME PROPOSAL. HE FOUND THAT IN REVISED PROPOSAL SUBMIT TED TO THE CONCERNED AUTHORITIES AND APPROVED ON , THE CONSTRU CTION AREA OF ALL BUNGALOWS INCLUDING THOSE BEING CONSTRUCTED FOR LAND OWNERS, EXCEPT TWO BUNGALOWS WERE FOUND BELOW 1500 SQ.FT. THEREAFTER, ASSESSING OFFICER APPLIED PROVISION OF CLAUSE (A) O F SUB-SECTION 14, 9 INTRODUCED BY THE FINANCE (NO.2) ACT, 2004 W.E.F. T O DEFINE BUILT UP AREA AND INCLUDED THE AREA OF VERANDAH IN BUILT UP AREA IN RESPECT OF 19 OTHERS BUNGALOWS TO HOLD THAT PROVISIONS OF S ECTION 80IB(10) WERE NOT COMPLIED WITH. HE ALSO NOTICED THAT AREA OF VERANDAH IS NOT EXCLUDED OR EXEMPTED U/S. 78(3) OF THE BYE-LAWS OF KOLHAPUR MUNICIPAL CORPORATION. THEREFORE, HE HELD THAT SIN CE VERANDAH IS A PROJECTION WHICH IS NOT A COMMON AREA SHARES WITH OTHER RESIDENTIAL UNITS AND ALSO BECAUSE IT IS A PART OF TOTAL AREA WHICH IS NOT EXEMPT UNDER RELEVANT BYE-LAWS OF THE KOLHAPUR MUNICIPAL CORPORATION. THUS, ACCORDING TO THE ASSESSING OFFI CER SINCE 21 RESIDENTIAL UNITS OF THE PROJECT VIOLATED PROVISION S REQUIRING RESIDENTIAL UNITS TO BE BELOW 1500 SQ.FT., DEDUCTIO N U/S.80IB(10) WAS NOT ALLOWABLE. FURTHER, ACCORDING TO ASSESSING OFFICER, OTHER CONDITION OF THE TOTAL AREA OF COMMERCIAL SHOPS WAS ALSO VIOLATED IN AS MUCH AS THE TOTAL BUILT UP AREA OF SHOPS (670 1.43 FEET) WAS FOUND TO BE EXCEEDING MAXIMUM LIMIT OF 2000 FEET. ACCORDING TO ASSESSING OFFICER PRIOR TO 01.04.2005 THERE WAS NO SCOPE UNDER THE ACT TO CONSTRUCT ANY COMMERCIAL SPACE, HENCE, H E HELD THAT BY VIRTUE OF CONSTRUCTING AND SELLING COMMERCIAL SPACE ADMEASURING 6701.43 FEET, THE ASSESSEE WAS NOT ELIGIBLE FOR DED UCTION U/S.80IB(10). 2.9 REGARDING DENIAL OF DEDUCTION U/S. 80IB(10) ON ACCOUNT OF CONSTRUCTION AND SALE OF COMMERCIAL SPACE ADMEASURI NG 6701.43 FEET IN THE PROJECT SANCTIONED PRIOR TO 01.04.2005 AS STATED ABOVE, THE PROJECT WAS APPROVED BY COMPETENT AUTHORITY BEF ORE 01.04.2005 MEANING THEREBY THAT PROJECT WAS AN APPR OVED HOUSING PROJECT AS PER LOCAL DC RULES. ON THE DATE ON WHICH THE LEGISLATURE INTRODUCED 100% DEDUCTION UNDER THE I.T ACT, 1961 ON THE PROFITS DERIVED FROM HOUSING PROJECTS APPROVED BY A LOCAL AUTHORITY, IT WAS KNOWN THAT THE LOCAL AUTHORITIES COULD APPROVE THE PROJECTS AS HOUSING PROJECTS WITH COMMERCIAL US ER TO THE EXTENT PERMITTED UNDER THE DEVELOPMENT CONTROL RULE S FRAMED BY 10 THE RESPECTIVE LOCAL AUTHORITY. THE LOCAL AUTHORIT Y COULD APPROVE A HOUSING PROJECT WITHOUT OR WITH COMMERCIAL USE TO T HE EXTENT PERMITTED UNDER DEVELOPMENT RULES AS HELD IN CIT, P UNE VS. BRAHMA ASSOCIATES (2011) 333 ITR 289 (BOM), WHEREIN , THE HONBLE BOMBAY HIGH COURT HELD AS UNDER; 22. IT IS NOT IN DISPUTE THAT WHERE A PROJECT IS APPROVED AS A HOUSING PROJECT WITHOUT OR WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE RULES/REGULATIONS, THEN, DEDUCTION UNDER SECTION 80-IB(10) WOULD BE ALLOWABL E. IN OTHER WORDS, IF A PROJECT COULD BE APPROVED AS A HO USING PROJECT HAVING RESIDENTIAL UNITS WITH PERMISSIBLE C OMMERCIAL USER, THEN IT IS NOT OPEN TO THE INCOME-TAX AUTHORI TIES TO CONTEND THAT THE EXPRESSION 'HOUSING PROJECT' IN SE CTION 80- IB(IO) IS APPLICABLE TO PROJECTS HAVING ONLY RESIDE NTIAL UNITS. 24. THE FACT THAT THE DEDUCTION UNDER SECTION 80-IB (10) PRIOR TO 1-4-2005 WAS ALLOWABLE ON THE PROFITS DERI VED FROM THE HOUSING PROJECTS CONSTRUCTED DURING THE SPECIFI ED PERIOD, ON A SPECIFIED SIZE OF THE PLOT WITH RESIDENTIAL UN ITS OF THE SPECIFIED SIZE, IT CANNOT BE INFERRED THAT THE DED UCTION UNDER SECTION 10-IB(IO) WAS ALLOWABLE TO HOUSING PROJ ECTS HAVING RESIDENTIAL UNITS ONLY, BECAUSE, RESTRICTION ON TH E SIZE OF THE RESIDENTIAL UNIT IS WITH A VIEW TO MAKE AVAILABLE L ARGE NUMBER OF AFFORDABLE HOUSES TO THE COMMON MAN AND NOT WITH A VIEW TO DENY COMMERCIAL USER IN RESIDENTIAL BUILDINGS. IN OTHER WORDS, THE RESTRICTION UNDER SECTION 80-IB(10) RE GARDING THE SIZE OF THE RESIDENTIAL UNIT WOULD IN NO WAY CURTAI L THE POWERS OF THE LOCAL AUTHORITY TO APPROVE A PROJECT WITH CO MMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DC RULES/REGULATIONS. THEREFORE, THE ARGUMENT OF THE REVENUE THAT THE RESTRICTION ON THE SIZE OF THE RES IDENTIAL UNIT IN SECTION 80-IB(IO) AS IT STOOD PRIOR TO 1-4-2 005 IS SUGGESTIVE OF THE FACT THAT THE DEDUCTION IS RES TRICTED TO HOUSING PROJECTS APPROVED FOR RESIDENTIAL UNITS ONL Y CANNOT BE ACCEPTED. 25. THE ABOVE CONCLUSION IS FURTHER FORTIFIED BY CL AUSE (D) TO SECTION 80IB(10) INSERTED WITH EFFECT FROM 1-4-2 005. CLAUSE (D) TO SECTION 80IB(10) INSERTED WITH EFFECT FROM 1-4- 2005 PROVIDES THAT EVEN THOUGH SHOPS AND COMMERCIAL ESTABLISHMENTS ARE INCLUDED IN THE HOUSING PROJECT, DEDUCTION UNDER SECTION 80-IB(10) WITH EFFECT FROM 1-4-2005 WOULD BE ALLOWABLE WHERE SUCH COMMERCIAL USER DOES NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEV ER IS LOWER. BY FINANCE ACT, 2010, CLAUSE (D) IS AMENDED TO THE 11 EFFECT THAT THE COMMERCIAL USER SHOULD NOT EXCEED T HREE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR FIVE THOUSAND SQUARE FEET WHICHEVER IS HIGHER. THE EXPRESSION 'INCLUDED' IN CLAUSE (D) MAKES IT AMPLY CLEAR THAT COMMERCIAL USER IS AN INTEGRAL PART OF A HOUSING PR OJECT. THUS, BY INSERTING CLAUSE (D) TO SECTION 80IB(10) T HE LEGISLATURE HAS MADE IT CLEAR THAT THOUGH THE HOUSI NG PROJECTS APPROVED BY THE LOCAL AUTHORITIES WITH COM MERCIAL USER TO THE EXTENT PERMISSIBLE UNDER THE DC RULES/REGULATIONS WERE ENTITLED TO SECTION 80IB(10) DEDUCTION, W.E.F. 01.04.2005 SUCH DEDUCTION WOULD B E SUBJECT TO THE RESTRICTION SET OUT IN CLAUSE (D) OF SECTION 80IB(10). THEREFORE, THE ARGUMENT OF THE REVENUE T HAT W.E.F. 01.04.2005 THE LEGISLATURE FOR THE FIRST TIME ALLOW ED SECTION 80IB(10) DEDUCTION TO HOUSING PROJECTS HAVING COMME RCIAL USER CANNOT BE ACCEPTED. 2.10 THUS, PRIOR TO 01.04.2005, THERE WAS NO SCOP E UNDER ACT FOR AN UNDERTAKING TO CONSTRUCT ANY COMMERCIAL SPACE AN D PROJECT SHOULD BE 100% IN ORDER TO AVAIL BENEFIT OF SECTION 80IB(10) HAS NOT FOUND FAVOUR WITH THE HIGH COURT. THUS ASSESSE E WAS ENTITLED TO BENEFIT OF DEDUCTION U/S. 80IB(10) IN RESPECT OF PROFITS DERIVED FROM APPROVED PROJECT INCLUDING PROFITS FROM SALE O F COMMERCIAL SPACE. THIS FACTUAL LEGAL BACKGROUND, NEED NO INTE RFERENCE FROM OUR SIDE ON THIS POINT. WE UPHOLD THE SAME. 3. IN RESPECT OF OTHER REASON THAT 21 BUNGALOWS VIO LATED THE REQUIREMENT OF RESIDENTIAL UNIT BEING MORE THAN 150 0 FEET AND THEREFORE, THE DEDUCTION WOULD BE DENIED. THE CLAU SE (A) OF SUB- SECTION 14, INTRODUCED BY THE FINANCE (NO.2) ACT, 2 004 W.E.F. 01.04.2005 TO DEFINE BUILT UP AREA WHEREIN PROJECTI ON COMMONLY KNOWN AS VERANDAH IS INCLUDED IN THE 'BUILT-UP AREA'. THE ISSUE IS WHETHER THE PROVISIONS OF CLAUSE (A) OF SUB-SECTION (14) WILL HAVE RETROSPECTIVE APPLICATION OR NOT? ACCORDING TO CIT( A), RESTRICTION IN 'BUILT-UP AREA' IMPOSED FOR THE FIRST TIME W.E.F. 0 1/04/2005 CANNOT HAVE RETROSPECTIVE APPLICATION. THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE VS. ANRIYA PROJECT MANAGEMENT SERVICES (P.) LTD. REPORT ED IN [2012] 21 12 TAXMANN.COM 140 (KARNATAKA), WHEREIN THIS PROVISION WAS EXAMINED. THE QUESTION WAS WHETHER THE DEFINITION OF 'BUILT-UP AREA' INSERTED BY FINANCE (NO.2) ACT, WHICH BECAME EFFECTIVE FROM 01/04/2005 IS PROSPECTIVE OR RETROSPECTIVE IN NATUR E. IT WAS HELD TO BE PROSPECTIVE IN NATURE. THE SAID AMENDMENT WOU LD HAVE NO APPLICATION TO THE HOUSING PROJECTS, WHICH WERE APPROVED BY THE LOCAL AUTHORITY PRIOR TO 01/04/2005 IN CALCULA TING 1500 FEET OF RESIDENTIAL UNIT AND IT FURTHER HELD THAT ONCE SUCH HOUSING PROJECT OF ASSESSEE IS APPROVED BY LOCAL AUTHORITY PRIOR TO 01.04.2005, IT WOULD BE ENTITLED TO 100% BENEFIT OF PROVISIONS OF SECTION 80IB(10). SIMILARLY, THIS VIEW HAS BEEN TAKEN BY T HE HONBLE GUJARAT HIGH COURT IN THE CASE OF MANAN CORPORATION V. ACIT, CIRCLE-5 WHEREIN DECISION OF ASSESSEE HAS REFERENCE OF SUPREME COURT IN THE CASE OF CIT U. GOLD COIN HEALTH FOOD P. LTD. [2008] 304 ITR 308 (SC),CIT V. TVS LEAN LOGISTICS LTD. [2007) 293 ITR 432(MAD), AND NATIONAL AGRICULTURAL CO-OPERATIVE MARKETING FEDERATION OF INDIA LTD. AND ANOTHER, VS. UNION OF INDIA AND OTHERS AIR 2003 SC 1329, WHEREIN ON THE POINT OF RETROSPECTIVE DATE WAS HELD THAT CRITERIA TO HOLD THIS AMENDMENT RETROSPE CTIVE WAS ABSENT AS THERE WAS NO EXPLICIT RETROSPECTIVE SPECI FIC WORDING EXPRESSING RETROSPECTIVITY AND EVEN IF IT IS ASSUME D FOR THE SAKE OF ARGUMENTS THAT THE SAME IS TO BE READ BY IMPLICATIO N THE SAME DOES NOT APPEAR TO BE REASONABLE BUT, IN FACT EMERG ES TO BE HARSH AND UNREASONABLE WHEN IT COMES TO IMPLEMENTATION. THUS, THE AMENDMENT WITH RESPECTIVE BUILT UP AREA DISCUSSED A BOVE WAS FOUND SUBSTANTIVE AMENDMENT AND NOT CLARIFICATORY O NE. ACCORDINGLY, SAME HAS NO RETROSPECTIVE EFFECT. 3.1 WITHOUT PREJUDICE TO THE ABOVE, THE MAIN LIMB O N WHICH DEDUCTION WAS DENIED WAS FOR THE REASON THAT AREA O F VERANDAH WA S NOT EXCLUDED OR EXEMPT UNDER SECTION 78(3) OF THE BYE-LAWS OF KOLHAPUR MUNICIPAL CORPORATION. CIT(A) FOLLOWING TH E DECISION OF HIS PREDECESSOR, DECIDED THE ISSUE IN FAVOUR OF ASS ESSEE WITH 13 REGARD TO 19 BUNGALOWS. WITH REGARD TO BUNGALOWS C 5 AND D5 WHICH ADMITTEDLY ARE MORE THAN 1500 SQ.FT., BUT WER E SOLD TO THE OWNERS OF THE LAND AND PROFIT THEREOF HAS NOT BEEN THE SUBJECT MATTER OF SECTION 80IB(10). ACCORDINGLY, NO ADVERS E VIEW HAS TAKEN BY CIT(A). COMING BACK TO THE ISSUE OF BUILT UP AREA AS PER BYE-LAWS OF KOLHAPUR MUNICIPAL CORPORATION WITH REG ARD TO 19 BUNGALOWS MENTIONED ABOVE, WE FIND THAT TRIBUNAL HA S SET ASIDE THIS ISSUE TO ASSESSING OFFICER BY OBSERVING AS UND ER; 9. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT. THEMAIN ISSUE CONCERNS THE DEFINITION OF BUILT UP A REA. THERE WAS NO DEFINITION IN THE ACT OF THE TERM 'BUILT UP AREA' FOR THE YEAR UNDER APPEAL. THE FINANCE ACT OF 2004 WITH EFF ECT FROM 01/04/2005 INSERTED THE DEFINITION OF BUILT UP AREA AT SUB- SECTION 14(1) OF SECTION 80IB. THE 'BUILT UP AREA' WAS DEFINED AS UNDER: BUILT UP AREA MEANS THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL INCLUDING THE P ROJECTIONS AND BALCONIES AS INCREASED BY THE THICKNESS OF THE WALL S BUT DOES NOT INCLUDE COMMON AREAS SHARED WITH OTHER RESIDENT IAL AREAS. TECHNICALLY SPEAKING, THE DEFINITION OF 'BUILT UP A REA' AS GIVEN ABOVE WILL BE APPLICABLE ONLY WITH EFFECT FROM 01/0 4/2005. THE HONOURABLE SUPREME COURT IN A RECENT FIVE JUDGE BENCH DECISION IN THE CASE OF CIT V/S VARAS INTERNA TIONAL PVT. LTD., 283 ITR 485 HAS HELD THAT FOR AN AMENDME NT TO BE CONSTRUED AS BEING RETROSPECTIVE, THE AMENDED PROVI SION MUST INDICATE EITHER BY TERMS OR BY NECESSARY IMPLI CATION THAT IT IS TO OPERATE RETROSPECTIVELY. THE APEX COU RT HAS REFERRED TO ITS EARLIER DECISIONS IN THE CASE OF AL LIED MOTORS PVT. LTD. 224 ITR 677 (SC), PODDAR CEMENT PVT. LTD. 223 ITR 825 (SC) AND BRIJMOHANDAS LAXMANDAS V/S CIT, 226 IT R 625. THE ABOVE JUDGEMENT HAS CLEARED THE CONTROVERS Y OF WHETHER A CLARIFICATORY AMENDMENT SHOULD BE CONSTRU ED AS BEING RETROSPECTIVE UNLESS SPECIFIED OTHERWISE. 3.2 FACTS BEING SIMILAR, SO FOLLOWING THE SAME REAS ONING, WE RESTORE THIS ISSUE TO ASSESSING OFFICER WITH SIMILA R DIRECTIONS. AS A RESULT, APPEAL OF REVENUE IS PARTLY ALLOWED AS INDI CATED ABOVE. SIMILAR ISSUE AROSE IN OTHER YEARS. FACTS BEING SI MILAR, SO 14 FOLLOWING THE SAME REASONING, WE PARTLY ALLOWED THE REVENUES APPEAL AS INDICATED ABOVE. 4. CROSS OBJECTIONS FILED ON BEHALF OF ASSESSEE ARE NOTHING BUT SUPPORTING THE ORDER OF CIT(A) WHICH ARE TAKEN CARE BY US WHILE DISPOSING OFF REVENUES APPEAL, SO THEY ARE ALSO DI SPOSED OFF ACCORDINGLY. 5. IN THE RESULT, ALL APPEALS FILED BY THE REVENUE AS WELL AS CROSS OBJECTIONS FILED BY ASSESSEE ARE PARTLY ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF NOVEMBER, 2013. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED 29 TH NOVEMBER, 2013 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A), KOLHAPUR 4) THE CIT, KOLHAPUR 5) THE DR, B BENCH, I.T.A.T., PUNE 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY ITAT PUNE BENCHES, PUNE